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The BMG case affirms that courts will not automatically grant ISP defendants protection under DMCA safe harbor and that "soft terminations" are not a sufficient ISP response to repeat infringers.

When an online user violates copyright law, the copyright owner will frequently turn to the user's internet service provider (ISP) for relief. The Digital Millennium Copyright Act (DMCA) includes a safe harbor provision that provides ISPs with protection from a potential flood of copyright infringement claims for customer actions, provided the ISP complies with certain conditions. These include a requirement that the ISPs adopt and reasonably implement "a policy that provides for the termination in appropriate circumstances of subscribers and account holders of the service provider's system or network who are repeat infringers..." 17 U.S.C. §512(i). The U.S. District Court for the Eastern District of Virginia recently held that an ISP could not seek protection under the DMCA safe harbor provision because of its failure to comply with this condition. SeeBMG Rights Management (US) LLC, et al. v. Cox Communications, Inc., et al., Civil No. 1:14-cv-1611 (12/1/2015). The BMG case is significant because it provides guidance on the type of actions an ISP needs to take (or not take) in order to satisfy the termination policy condition.

The court in the BMG case first broke the condition down into two main questions: 1) whether the BMG defendant had a reasonable policy to deal with repeat infringers and 2) whether the BMG defendant had implemented that policy. The court found that a policy is reasonable when a repeat infringer's account is terminated in appropriate circumstances, and "appropriate circumstances clearly cover account holders who repeatedly or flagrantly infringe copyright, particularly infringement of a willful and commercial nature." The BMG court joined other courts in noting that an ISP's knowledge of an individual's infringing activities, as opposed to a court's adjudication of an individual's infringement, is sufficient for the individual to be considered an infringer under the safe harbor provision.

Applying these rules to the facts of the case, the court found that the BMG defendant had actual knowledge that multiple individual customers were repeat infringers and, despite this knowledge, the BMG defendant refused to implement its termination policy. There were numerous internal emails in the record in which representatives of the BMG defendant refused to terminate a repeat infringer for the sake of retaining the individual as a paying customer. For a period of time, the BMG defendant's strategy was to implement "soft terminations," in which a repeat infringer's account was terminated, only to be reinstated as soon as requested by the infringer. Beginning in 2012, the BMG defendant changed its policy to actually terminate accounts, but at that point, the rate of termination dropped significantly due to the BMG defendant giving repeat infringers second chances, third chances and even 14th chances to use the Internet service legally. Among the users whose accounts were terminated, most had also either failed to pay their bills or were excessive bandwidth users. Based on this evidence, the court refused to grant DMCA safe harbor protection to the BMG defendant.

Although the court found that the BMG defendant had actual knowledge of infringing activity by certain customers, it noted that some courts have found "red flags" knowledge to be an acceptable level of knowledge for purposes of the safe harbor analysis. For content ISPs such as YouTube, in which customers can upload content through the ISP, either actual knowledge or "red flags" knowledge has been held to be sufficient knowledge of infringement. This lower "red flags" standard is a result of express language in the safe harbor conditions that are specific to content ISPs. However, there is no guidance in the DMCA as to whether "red flags" knowledge of infringing activity constitutes sufficient knowledge for a general ISP such as the BMG defendant. Notably, the U.S. Court of Appeals for the Ninth Circuit has previously applied the "red flags" knowledge standard to general ISPs. See Perfect 10, Inc. v. CCBILL LLC, 488 F.3d 1102, 1113-1114 (9th Cir. 2007). But in the BMG case, the court (residing in the Fourth Circuit) declined to determine whether the "red flags" knowledge is sufficient for general ISPs.

Key Takeaways

The BMG case provides helpful guidance for both ISPs and rights holders.

This case reaffirms that courts will not automatically grant ISP defendants protection under the DMCA safe harbor and will thoroughly review ISP responses to takedown notices.

"Soft terminations" are not a sufficient ISP response to repeat infringers. Although no business wants to cut off its own customers, the potential legal liability will likely outweigh any financial benefits from retaining repeat infringers as customers.

DMCA notices, while not absolute evidence that an individual is infringing, are "powerful evidence of a service provider's knowledge." As the BMG court demonstrated, the sufficiency of "red flags" knowledge for general ISPs is not settled law throughout the country, but a general ISP cannot rely on this when it has received multiple notices about potential infringing activity by a customer. As a precaution against facing suit in an unfavorable district, all ISPs should be prepared for the court to deem "red flags" knowledge of infringing activity sufficient knowledge with respect to the safe harbor analysis.

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